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Tanzania Country Brief: March 2011 Print E-mail
Wednesday, 20 April 2011
Updates on the business environment, data, sector news and regional developments.

BUSINESS ENVIRONMENT

  • Prime minister assures investors on infrastructure investment: Prime Minister Mizengo Pinda told a group of investors at the Economist Tanzania Summit that his government was committed to improving the poor infrastructure, human resources and power supplies that currently impede business growth in the country. He also highlighted the ICT sector as an area to receive significant government funding to promote economic growth. The issue of power cuts came out particularly strongly among investors. Infotech Investment estimated the cost to the national economy due to power problems at TZS1trn per month.
  • Revenues fall at Musoma port: Poor infrastructure and a fall in cotton production have led to a fall in revenues at Musoma port. Revenues from the port in 2009/10 were just TZS5.9m, down from TZS54.7m in 2007/08. Minister for Transportation Omari Nundu, on a visit to Musoma, said that government was in the process of improving port infrastructure to enhance economic growth.
  • Dar es Salaam port set for modernisation: Cargo dwelling time at Tanzania’s biggest port will fall from eleven days to five when a planned USD6m modernisation plan is implemented. Otieno Igogo, President of Tanzania Freight Forwarders Association, emphasised that implementation of the Single Electric Window (SEW) would increase efficiency and cut the opportunities for corruption. The project is to be funded by the World Bank through the East African Community Transport and Trade Facilitation Project.

DATA
  • Growth: The IMF has cut its growth forecast for Tanzania due to the combination of power problems, drought and rising international food and fuel prices. The country grew by 7% in 2010, but the IMF lowered its growth forecasts for 2011 and 2012 to 7.2% and 7.5% respectively. In its latest monetary policy statement, the central bank projected growth of 7.1% for 2011. Senior IMF resident representative John Wakeman-Linn stated that the medium-term growth forecast of 7% to 7.5% was likely to remain unchanged, provided the power problems were resolved.
  • Exports: Tanzania Exporters Association (TANEXA) has warned that the country’s power crisis is likely to further threaten the declining export industry. In figures released by the Confederation for Tanzanian Industry (CTI), almost a quarter of their members had suspended operations due to the costs associated with power cuts.


INDUSTRY NEWS
Agriculture:

  • Milk producers criticise bureaucracy: Representatives of the dairy industry have criticised government for hindering the growth of the industry due to over-regulation. Davangwa Mmari, Chairman of the Tanzania Milk Processors Association, blamed bureaucracy for discouraging growth of the sector and urged government to address productivity as well as quality control issues.
Energy:
  • Petrol rises to TZS2,000 per litre: Petrol prices continue to rise on the back of rising oil prices on global markets. Prices reached TZS2,000 per litre in Dar es Salaam, with higher prices elsewhere. The impact on the cost of living of Tanzanians is likely to be significant, although it is yet to be quantified as the National Bureau of Statistics delayed the release of the March CPI due to a ‘technical problem’. President Jakaya Kikwete ordered the Ministry of Finance and Economic Affairs to take measures to ensure costs of living remained bearable.
  • Wind power deal struck with Chinese bank: The Exim Bank of China will fund a 50MW wind power plant in the Singida region. The project is projected to cost over TZS150bn. On announcing the deal, Deputy Minister for Industry, Trade and Marketing, Lazaro Nyalandu, also announced that the Chinese and Tanzanian governments will collaborate to fund a research and development centre at one of the country’s universities to look at renewable energy issues.
  • Natural gas pipeline proposed: Northern Irish company Castletown Enterprises has expressed an interest in developing a new pipeline to transport natural gas from the Songo Songo gas field to Dar es Salaam. The project would add up to 200MW to the national grid with potential to rise to 500MW in the future. Castletown, based near Belfast, hope to soon enter a Memorandum of Understanding with the government to formalise the relationship and allow implementation to begin.
  • Energy costs jump again: The Tanzania Electricity Supply Company (Tanesco) is now paying up to TZS15bn every month to Independent Power Tanzania Limited (IPTL) for the production of 60MW of power. According to David Jairo, Permanent Secretary in the Ministry of Energy and Minerals, this is a huge increase from the costs before the current power crisis. The Permanent Secretary also said that government was investing in natural gas as an alternative energy source with Mnanzi Bay, Kinyerezi and Sumanga expected to produce a cumulative 770MW.
  • New entrant to oil and gas sector: Afren, an oil and gas group, has acquired a 74% stake in the Tanga block from Petrodel Resources Ltd. The company becomes the 19th oil and gas exploration company in Tanzania. The block borders existing Afren operations in Southern Kenya.
  • Tanesco questioned on TZS580bn misallocation: MPs have questioned executives from the Tanzania Electric Supply Company (Tanesco) about TZS586bn that had been misappropriated. In response, William Mhando, Managing Director at Tanesco, refuted the allegation, claiming that the money was used for various legitimate operations within the organisation. Dr Ramadhan Malinga, CEO of the Public Procurement Regulatory Authority, countered that only 30% of public institutions were adhering to appropriate procurement planning standards.

Mining:
  • Opposition to plans to cut power to mines: The Tanzania Chamber of Minerals and Energy (TCME) has asked for a review of a planned cut of 50MW to mines resulting from the ongoing energy crisis. TCME Executive Secretary Emmanuel Jengo revealed that this figure was based on a faulty assumption of how much energy is used by the mining sector, adding that the reduction would be tantamount to the closure of some mines with consequences for some 13,000 workers.
  • NSSF plans buy Kiwira mine: The Kiwira coal mine, which owes the NSSF over TZS15bn, is the subject of a one-dollar bid by the fund. The Parliamentary Public Organisations Accounts Committee (POAC) heard from Yacoub Kidula, Director of Planning, Investment and Projects, that the mine had accumulated debts of over TZS28.7bn, with NSSF is the major creditor.
  • Tanzania Minerals Corp start drilling: In Mrangi in the north of the country, Tanzania Minerals Corp has begun phase one of a drilling programme aimed at testing mineralised outcrops and subcrops associated with the formation of banded iron. The firm has commissioned a geological survey company to carry out a structural study based on satellite imagery to assist their exploration.

Tourism:
  • Tanzania falls 12 places in global tourism rankings: Tanzania has fallen from rank 98 to rank 110 (of a total of 139 countries) in a global study of travel tourism competitiveness. The drop has been attributed to inadequate tourism policies, poor infrastructure, security risk and insufficient health resources. The country remains ahead of Uganda (115) and Burundi (137) but behind Rwanda (102) and Kenya (103). This is despite the country ranking second worldwide for its natural environment.

Telecommunications:
  • Telecoms expansion slows: The rapid growth of the telecommunications sector slowed in the last quarter of 2010, with less than 400,000 new subscribers compared to over 1m in the previous quarter, according to the Tanzania Communications Regulatory Authority (TCRA). As of the end of 2010, there were 21,158,364 telecom subscribers, with Vodacom maintaining a market share of 41%. The slowdown came despite huge promotional drives by the network operators, implying that the market may be moving towards saturation but with significant competition for subscriptions between the seven active network operators.
  • Communications costs in Zanzibar to fall: Tanzania has secured a USD20m loan from the Chinese government to lay an optical transmission network to Zanzibar. Work will begin next month and is expected to be completed within a year.
  • Vodacom outsources network: Vodacom Tanzania has taken steps to streamline its business and increase shareholder value by outsourcing the operation and management of its network to Nokia Siemens Networks (NSN). As part of a five-year contract, NSN will take operational control of Vodacom’s management centre, radio, transmission and core networks. 124 members of Vodacom staff will transfer across to NSN.

DEVELOPMENT FINANCE
  • UN to invest TZS1trn: The United Nations (UN) have announced plans to invest USD773m (TZS1.08tn) in Tanzania over four years from July 2011. 24% of this budget will be spent on the protection of refugees, according to Alberic Kacou, Resident Coordinator of the UN System in Tanzania. The remainder will be spread across a number of development priorities consistent with the MDGs, such as health (17%), environment and climate change adaptation (14%), education (13%) and governance (9%).
  • France to more than double aid to Tanzania: The French Ambassador to Tanzania, Jacques Champagne, has announced that France plans to increase financial aid to Tanzania from USD70m to USD150m. The focus of the investment will be on energy efficiency, education, water supply and sanitation, urban development and the financial sector. There will also be an increased concentration on environmental and natural resource management.
  • World Bank approves USD30m loan for data systems: The World Bank is to invest USD30m (TZS42bn) to support the development of relevant, timely and reliable data to enhance evidence-based policy making in Tanzania. Funds from the UK’s Department for International Development and the Canadian International Development Agency will also contribute towards the project, estimated to cost a total of USD64.4m. Plans for reforms are detailed in the Tanzania Statistical Master Plan (TSMP) approved by government in June 2010.
  • AfDB to provide TZS250bn for energy and water sectors: The African Development Bank (AfDB) has approved a TZS251.6bn loan to go towards the Rural Water Supply and Sanitation Programme. Around 40% of the money will be spent on the Iringa-Shinyanga Electricty Transmission Line Project with the remainder helping the implementation of 500 local water supply programmes and National Sanitation Campaigns.

REGIONAL NEWS
  • East Africa rail project to cost up to USD5bn: The upgrade of the Dar es Salaam–Isaka railway and extensions into Burundi and Rwanda are estimated to cost between USD3.4bn and USD5.1bn according to Omari Nundu, Minister for Transport. The government is seeking potential investors from both development organisations and the private sector under a new PPP framework that have been embraced by the three countries. There remains doubt over whether the existing track should be upgraded to dual gauge or standard gauge, or indeed whether a brand new parallel standard gauge line might be most cost effective. Rwanda’s economy in particular suffers from notoriously high transport costs and the rehabilitation of the Kenya-Uganda railway from Mombasa seaport has only made slow progress. In addition, Rwanda suffered supply shortages when the Kenya-Uganda railway link was disrupted during the Kenyan post-election violence in early 2008, so the country is keen to diversify its supply routes.



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